Marketing

Referral Programs: an Excellent Marketing and New Business Development Tool

Building deep relationships with clients is a cornerstone of any successful business venture. It is no secret that customers today are less trusting of what companies say themselves versus what their friends, colleagues or a third party say about a business.

You stand to gain!

How? When those satisfied customers tell their friends and colleagues about you, they become passionate ambassadors (brand ambassadors) – a critical part of your ongoing marketing efforts – by keeping your brand at the top of people's minds.

Referrals are even more valuable in that they have the potential to generate new clients for you without you having to seek out those clients first.

A recent study of a service industry company referral program found that:

• referred customers initially produce profit margins that are 25% higher than non-referred customers. • the lifetime customer value of a referred customer was 16% higher than a non-referred customer.• referred customers are 18% less likely to leave than non-referred customers.• referred customers have a much higher closing ratio at 60% (versus 10 percent with non-referred customers).• clients will go out of their way to tell others about your business if you give them an incentive to do so.

Another interesting and much overlooked fact about referral programs is that unlike paid advertising, they are a very low cost marketing option for new business development. Given that kind of marketing power, your referral program should fully capture and capitalize on word-of-mouth marketing from your existing clients.